The Differences Between Child Tax Credit and the Additional Child Credit
February 7, 2010 by Sandor Lenner
Filed under Finance
If you who have a dependent child who is younger than 17 by December 31, 2009 then you may be eligible for a $1,000 Child Tax Credit for each child.
How to Claim the Credit – To claim the Child Tax Credit there are requirements for the qualifying child, requirements for the taxpayer and certain limits on the amount of the credit. In general, a qualifying taxpayer must follow the same rules as claiming a dependency exemption with the exception that the child must be under the age of 17 before December 31, 2009. In order for the child to qualify, the child must not have provided his or her own support during 2009 and child must have lived with the taxpayer for more than half of the year. In addition the child must be the taxpayer\’s child, stepchild, adopted child,eligible foster child, grandchild, brother, sister, stepbrother, stepsister, etc. Further, a qualifying child must be a U.S. citizen or resident of the United States.
Income Limits – The Child Tax Credit that you can claim for a Child Tax Credit is dependent upon the your tax liability, filing status and your modified adjusted gross income. The child tax credit starts to phase out when your modified adjusted gross income is equal to $110,000 for joint filers or $75,000 for single taxpayers or $55,000 for married taxpayers who file separately. If the amount of the credit is greater than your tax liability, then the you may be eligible for a refundable credit. This extra credit is known as the \”Additional\” Child Tax Credit and is discussed below.
Changes for 2009 The 2009 Recovery Act increased the eligibility for claiming the credit by reducing the earned income threshold. Previously to be eligible for the refundable portion of the Child Tax Credit the taxpayer was required to have earned income in excess of $12,550. The Recovery Act now reduces the earned income minimum from $12,550 to $3,000.
Refund Amounts – The amount of the Child Tax Credit is not permitted to exceed your tax liability. For example, when the tax liability is zero, then the Child Tax Credit is zero because there is no liability to reduce. Fortunately if you are not able to take the full amount of the Child Tax Credit then you may be entitled to claim an \”Additional\” Child Tax Credit.
If I am Not Eligible for the Child Tax Credit then What ? – In you are not eligibleto take the Child Tax Credit, you may then qualify for the \”Additional\” Child Tax Credit. The \”Additional\” Child Tax Credit can be as high as $1,000 for each qualifying child. What is good about this alternative is that the \”Additional\” Child tax credit may be able to lower your tax liability to below zero which may entitle you receive a refund for this excess.To qualify for this \” Additional\” Child tax Credit, you are required to have a tax liability that is less than the allowable child tax credit, meet the requirements of the regular Child Tax Credit and earn more than $11,750 in 2009. If you meet these requirements, then you may be entitled to receive a refund for the \”Additional\” Child Tax Credit. To compute this Additional Child Tax Credit there are more limitations and requirements that are not within the scope of this article and you should read IRS Publication 972.
Quick Summary – In summing up, the Child Tax Credit is a nonrefundable credit that provides taxpayers that qualify, to reduce their tax liability by an amount equal to the credit. Should a taxpayer not be able to use the $1,000 credit then they may be eligible for the \”Additional\” Child tax Credit which is a refundable tax credit.
Tax laws are complex, change constantly and each situation is unique. This article is not intended to provide legal or accounting advice. The reader should perform his or her own due diligence and consult competent professionals in this area.
Learn more about how we can help you determine if you are eligible for the Child Tax Credit and other available income tax credits and about our competitively priced paperless and internet based approach to tax preparation at affordable prices. Sandor(Sandy) E. Lenner,CPA-MBA has provided business and accounting services for over 35 years and enjoys working part-time at his wife\’s CPA firm
